Canada dlr boosted by North America bid, firmer oil

Mon Aug 25, 2008 10:08am EDT
 
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 * Canadian dollar likely to stay in a fairly tight range
 * Second-quarter GDP due Friday
 * Bond prices rise on safe haven bid
 By John McCrank
 TORONTO, Aug 25 (Reuters) - The Canadian dollar rose
against the U.S. dollar on Monday, helped by higher oil prices
and a general buy North America tone as the British pound sold
off in thin holiday trading.
 Domestic bond prices, with no domestic data to key off,
rose in a safe haven bid as equity markets fell.
 At 9:42 a.m. (1342 GMT), the Canadian dollar was at
C$1.0468 to the U.S. dollar, or 95.53 U.S. cents, up from
C$1.0486 to the U.S. dollar, or 95.37 U.S. cents, at Friday's
close.
 Oil prices were supportive of the commodity-based currency,
with U.S. crude oil CLc1 topping $115 a barrel after a big
slide on Friday. See [ID:nSYD137193]
 Canada's oil sands contain the biggest deposit of oil
outside of the Middle East. Canada is also the biggest supplier
of oil to the United States.
 Also helping the currency rise was a big fall in the
British pound, which slid to a two-year low against the U.S.
dollar after data showed on Friday that British economic
activity ground to a halt in the second quarter. The slide was
amplified by thin trading due to a UK holiday.
 This week will be a slow one for domestic data, with the
spotlight focusing on the earnings of Canada's biggest banks.
But that will not likely have much impact on the currency,
which is expected to be mostly rangebound, said Shane Enright,
currency strategist at CIBC World Markets.
 "In the early part of this week, the market is going to be
watching flows very closely, rather than any fresh news."
 Enright said there is at least one significant merger and
acquisition deal in the pipeline that should be converted into
Canadian dollars this week, which would persuade investors to
wait to buy U.S. dollars as they would find better entry levels
once the deal is complete.
 The main piece of Canadian data comes on Friday, when gross
domestic product for the second quarter will be released. That
will also be the last major piece of data before the Bank of
Canada makes its Sept. 3 rate announcement.
 Bank of Canada Deputy Governor David Longworth will give a
speech on Tuesday in Kingston, Ontario, on the central bank's
response to financial turbulence.
 BOND PRICES RISE
 Bond prices rose as a slide in equities increased the
appeal of safe haven government debt.
 "Markets do tend to trend and we've hit another pessimistic
jag, and that's going to take the bond market along with it,"
said Eric Lascelles, chief economics and rates strategist at TD
Securities.
 Friday's CORRA rate CORRA= was 3.0122 percent, up from
2.9830 percent on Thursday. The Bank of Canada publishes the
previous day's rates at around 9 a.m. daily.
 The two-year bond rose 8 Canadian cents to C$99.68 to yield
2.899 percent. The 10-year bond added 38 Canadian cents to
C$105.55 to yield 3.571 percent.
 The yield spread between the two-year and 10-year bond was
67.3 basis points, up from 63.4 at the previous close.
 The 30-year bond climbed 62 Canadian cents to C$116.57 for
a yield of 4.022 percent. In the United States, the 30-year
treasury yielded 4.390 percent.
 The three-month when-issued T-bill yielded 2.52 percent
unchanged from the previous close.
 (Editing by Scott Anderson)